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ABAT seems to be headed the wrong way, moving up not down, on a market wide panic sell of day?
I Think shorts are screwed here now!
LOL
Eco is LONG ABAT, and lovin it!
When the PR lists cash dollar amounts for hard contracted business, then we will know it is not fluff. When it dodges the question of how many dollars in new sales, revenue and profits it amounts to, rest assured it is fluff with this outfit. I have watched them play this game blow by blow for 3 years. They like to release open ended news and get peoples hopes up, instead of releasing all the facts.
They just made a fluff PR out of one licensee being replaced by another, not a new sale, which begs the question of what happened to the initial licensee, which they do not bother to tell us?
He did not dig very deep into ABAT. They were strictly a li-ion battery manufacturer until they bought a floundering e-bike vehicle customer that owed them a lot of money about 2 years ago now, and then they turned the E-vehicle company around with fresh cash, no debt.....
I stayed with them for 3 years, in spite of many early warning signs because I liked the business plan and tech. But management has screwed up at every turn. Only reason the doors were not closed with BK before is they have pulled the "Oh look at the cut new kitty" trick successfully 3 times now (Terra merger was the most recent one done in the middle of a non-court BK divestiture of the failed NJ plant (the original business), and they had bankster help with huge share dilution loans to help perpetrate the fraud, and pay the fat cat executive salaries while they lost more and more investor money.
I do not believe they will find the loans and cash needed to avoid BK again. I expect them to go BK in 6-12 months, or sell another 300 million shares at .05 while they still can, and then file BK.
Sales would need to increase 1000% in 3 months to keep the ship afloat at the current cash burn rate.
There is no sign that the executives have the right stuff to turn this beast around! They have pulled off the hail mary pass save three times, but each time was at the huge expense of stock holders, investors, and they have not been able to stop the bleed rate. In fact they added to the bleed rate when they merged with Terra by added zero Terra new sales and another 1-2 million dollar per year drain to the budget (nearly 1 million was added to the COIN budgest for salaries for adding the CEOs brother and the Terra CEO to the COIN staff and overhead)!
I think their current losses still exceed revenues! Then if you write down the huge smoke and mirrors asset value they have on the books for the purchase price of Terra, which has no sales now for 10-11 months, you add another 10 million dollar stockholders equity loss to the books when they write off the Terra purchase asset from the Goodwill category. Then, You have a company with negative stock holders equity, a history of losses at an average of 10 million per year for 5 years, that has had products on the market for nearly 3 years now, and they still failed to ever break even.
Interesting read for an unusual source. Guess everyone is talking about it now:
http://www.johnmauldin.com/images/uploads/pdf/mwo071611.pdf
Interesting read from an unexpected source. Guess every one is writing about this now:
http://www.johnmauldin.com/images/uploads/pdf/mwo071611.pdf
Which company was that about?
Frankly, I have suspected exactly what he said, was and is the real truth behind the entire mess.
I just hope these CEO's have the fortitude to pick up the pieces and put it all back together. I for one, am slowly putting cash into some of these at the bottom, fire sale prices. In fact I have already made money bottom fishing several of these China / US RMs.
"What does not kill you, makes you stronger"
Just what the hell is "clean energy coal-water slurry fuel" anyway?
Sounds like snake oil seudo science to me so far. Is there a link to a real, detailed, thermodynamic, chemical analysis, and run down on what this is, how it is purported to work, and so on, or is this just a smoke and mirrors deal, and no one is asking the right questions?
Ecomike
Chemical Engineer
Question is, will they survive the bottom, or will current shareholders survive the bottom with out drowning first. Still glad I took my losses and bailed out at in the 6-8 dollar zone. I just don't see any sustained up side potential to justify the ongoing risk that the assets of all these shippers are way overvalued on the books still!
Minor formality, and already priced into the stock.
I too have been holding and adding since before the R/S.
I was a little surprised at the new $16 target, but that may just be to make sure it gets to the $10 area.
I must agree. They ignore the possibility that a vastly improved formula, as in substantially less sensitivity to using the drug, means more people could use it, and thus it might increase sales?
It is also just a stepping stone, not a one trick pony!
The Huge Australian BHP buy out of Petrohawk NG assets must have helped as well!!
http://thebuttonwoodtree.wordpress.com/2011/07/15/sickness-petrohawk-to-be-acquired-by-bhp-billiton/
I would rather do that to the short pricks at CYTR right now, LOL! I already did it here at the last 52 week low!!!
Just dawned on me that today is options expiration, so the 48 hour sell off in ANX shares may be a rigged 2 day game to kill Call option values and spike Put option values, with game over at the close today!!!! If I am right, today's close or a final opening low on Monday, may be followed by a hard run back to $4 quickly next week!!! So heads up people!!!
APWR may be stalling to try and keep the NASDAQ listing, but who knows if that will be possible. Many others have just said screw Nasdaq and moved to Pink sheets already. It could be a month before they, APWR, makes a move IMHO.
I think the word from management that they are or were, (may already be a done deal), close to closing a senior secured note for cash (and not selling convertible debt, or doing a costly JV deal), put the bottom in about 10-14 days ago. They also said that once the deal was done (word then was it was about 2 weeks away), the would begin work on completed the well, Fracking and tie in to pipeline right away. So people have been buying and holding!!!
I don't have time to post a chart, but if you look at the 1 or 2 year chart today's low bounced off of a long term rising channel support, and was the third data point on the rising channel, so this is looking even more bullish now having bounce up off that rising support during such a nasty price drop.
China calls it a "Witch Hunt", and says Moodys is too Moody! LOL
http://www.marketwatch.com/story/macquarie-decries-witch-hunt-against-china-firms-2011-07-13?reflink=MW_news_stmp
In a note released Wednesday, the Australian investment bank said the Moody’s screen of 61 Chinese companies for risks in five areas, released Tuesday, seemed more akin to equities research than the bond issuers’ default risk assessments which are the agency’s primarily focus.
Market makers are low balling bids this morning. If you want a shot at shares at 80% off (currently, at the open best bid was 3000% off), LOL, now is the time to post a better bid and force MM bids up to yesterdays close. They had no luck tripping stop loss orders today.
The new symbol is MHAND
LOL, sooner or later people are going to look at the prior quarter's reported earnings of .03/share, and now with the R/S, that makes last quarters earnings $1.50/new-share in one quarter. Eventually people will see that data, and buy shares that are under $1 thinking it is a no brainer bargain buy!!!!
Somebody in another stock forum ticked me off today, they could not connect the dots on the article I posted earlier (last 24 hours) about the recent SEC and China chats about audit problems, enforcement, Audit problems, shorts, and so on. And I posted the following below in reply to several that said they did not see anything about shorts in the article...... I thought many readers that are newer, trying to connect the dots, might find my comments interesting. But let me mention that the article claimed that some China/US RM CEOs were caught between the option of telling auditors and the SEC to kiss off, or to violate criminal secrecy laws in China by making certain requested documents public domain.
What I would like to know is how the auditors crunch the same numbers, and audit the same inaccessible secret information on GE holdings in China?
Hmm, Perhaps GE is a fraud too?
For those babbling about no mention of shorts in the article, try connecting the dots. If the shorts had not shorted many of these China/US RM stocks en-mass to begin with, and then published the raging hit articles (Muddy Waters, Varian View, to name a few Alpha Seeking short attack paper writers), just when the annual reports were coming due (Note that the quarterly reports are not audited, only annuals), then the auditors would not have panicked and then asked for extra documents that could only be handed over by violating criminal statutes in China, and then the SEC would not have been bothered with this mass exodus of Auditors caused by CEOs refusing to violate criminal laws in China just to make overzealous auditors and the SEC happy. Don't you think the shorts like Muddy Waters and Varian View knew that trip wire was sitting there, and so they timed these attacks on high flyer stocks at just the right time, just before annual reports were coming due?
Somebody in another stock forum ticked me off today, they could not connect the dots on the article I posted earlier (last 24 hours) about the recent SEC and China chats about audit problems, enforcement, Audit problems, shorts, and so on. And I posted the following below in reply to several that said they did not see anything about shorts in the article...... I thought many readers that are newer, trying to connect the dots, might find my comments interesting. But let me mention that the article claimed that some China/US RM CEOS were caught between the option of telling auditors and the SEC to kiss off, or to violate criminal secrecy laws in China by making certain requested documents public domain.
What I would like to know is how the auditors crunch the same numbers, and audit the same inaccessible secret information on GE holdings in China?
Hmm, Perhaps GE is a fraud too?
For those babbling about no mention of shorts in the article, try connecting the dots. If the shorts had not shorted many of these China/US RM stocks en-mass to begin with, and then published the raging hit articles (Muddy Waters, Varian View, to name a few Alpha Seeking short attack paper writers), just when the annual reports were coming due (Note that the quarterly reports are not audited, only annuals), then the auditors would not have panicked and then asked for extra documents that could only be handed over by violating criminal statutes in China, and then the SEC would not have been bothered with this mass exodus of Auditors caused by CEOs refusing to violate criminal laws in China just to make overzealous auditors and the SEC happy. Don't you think the shorts like Muddy Waters and Varian View knew that trip wire was sitting there, and so they timed these attacks on high flyer stocks at just the right time, just before annual reports were coming due?
Yes indeed. The .06 seller is gone!!!!!!! I think the lights are about to get turned on here any day, no more than 2 weeks IMHO, and it could start sooner just on expectations, people wanting a better seat at the show that decide to arrive early!
LOL, make me laugh again, that was a good one! THANKS!!!
this company is on the right path to becoming profitable,
top executives taking pay cuts
Somebody in another stock forum ticked me off today, they could not connect the dots on the article I posted earlier (last 24 hours) about the recent SEC and China chats, Audit problems, shorts, and so on. And I posted the following below in reply to several that said they did not see anything about shorts in the article...... I thought many readers that are newer, trying to connect the dots, might find my comments interesting. But let me mention that the article claimed that some China/US RM CEOS were caught between the option of telling auditors and the SEC to kiss off, or to violate criminal secrecy laws in China by making certain requested documents public domain.
What I would like to know is how the auditors crunch the same numbers, and audit the same inaccessible secret information on GE holdings in China?
Hmm, Perhaps GE is a fraud too?
For those babbling about no mention of shorts in the article, try connecting the dots. If the shorts had not shorted many of these China/US RM stocks en-mass to begin with, and then published the raging hit articles (Muddy Waters, Varian View, to name a few Alpha Seeking short attack paper writers), just when the annual reports were coming due (Note that the quarterly reports are not audited, only annuals), then the auditors would not have panicked and then asked for extra documents that could only be handed over by violating criminal statutes in China, and then the SEC would not have been bothered with this mass exodus of Auditors caused by CEOs refusing to violate criminal laws in China just to make overzealous auditors and the SEC happy. Don't you think the shorts like Muddy Waters and Varian View knew that trip wire was sitting there, and so they timed these attacks on high flyer stocks at just the right time, just before annual reports were coming due?
Somebody in another stock forum ticked me off today, they could not connect the dots on the article I posted earlier (last 24 hours) about the recent SEC and China chats, Audit problems, shorts, and so on. And I posted the following below in reply to several that said they did not see anything about shorts in the article...... I thought many readers that are newer, trying to connect the dots, might find my comments interesting. But let me mention that the article claimed that some China/US RM CEOS were caught between the option of telling auditors and the SEC to kiss off, or to violate criminal secrecy laws in China by making certain requested documents public domain.
What I would like to know is how the auditors crunch the same numbers, and audit the same inaccessible secret information on GE holdings in China?
Hmm, Perhaps GE is a fraud too?
For those babbling about no mention of shorts in the article, try connecting the dots. If the shorts had not shorted many of these China/US RM stocks en-mass to begin with, and then published the raging hit articles (Muddy Waters, Varian View, to name a few Alpha Seeking short attack paper writers), just when the annual reports were coming due (Note that the quarterly reports are not audited, only annuals), then the auditors would not have panicked and then asked for extra documents that could only be handed over by violating criminal statutes in China, and then the SEC would not have been bothered with this mass exodus of Auditors caused by CEOs refusing to violate criminal laws in China just to make overzealous auditors and the SEC happy. Don't you think the shorts like Muddy Waters and Varian View knew that trip wire was sitting there, and so they timed these attacks on high flyer stocks at just the right time, just before annual reports were coming due?
What I would like to know is how the auditors crunch the same numbers, and audit the same inaccessible secret information on GE holdings in China?
Hmm, Perhaps GE is a fraud too?
For those babbling about no mention of shorts in the article, try connecting the dots. If the shorts had not shorted many of these China/US RM stocks en-mass to begin with, and then published the raging hit articles (Muddy Waters, Varian View, to name a few Alpha Seeking short attack paper writers), just when the annual reports were coming due (Note that the quarterly reports are not audited, only annuals), then the auditors would not have panicked and then asked for extra documents that could only be handed over by violating criminal statutes in China, and then the SEC would not have been bothered with this mass exodus of Auditors caused by CEOs refusing to violate criminal laws in China just to make overzealous auditors and the SEC happy. Don't you think the shorts like Muddy Waters and Varian View knew that trip wire was sitting there, and so they timed these attacks on high flyer stocks at just the right time, just before annual reports were coming due?
I have actually seen several stocks go up after a R/S. Depends on the price before the R/S, and news. I look at market cap range before an after as my guide.
The deed is done. The trading symbol at the open will be MHAND tomorrow. I have asked Admin to update the ticker here asap!
The news late today:
http://ih.advfn.com/p.php?pid=nmona&article=48430426&symbol=MHAN
Since we closed at .0065 today, .0065 x 50 = .325/share
Now the kicker is that the OS has dropped to just under 3 million shares, so any real news after the RS is going to see a very tight market for shares as the float is now tiny.
the Company's approximately 129.8 million pre-split shares of common stock outstanding will be combined into approximately 2.6 million post-split shares outstanding. The reverse stock split affects all issued and outstanding shares of the Company's Common Stock immediately prior to the Effective Time of the reverse stock split. In addition, proportional adjustments will be made to the Company's equity awards, outstanding warrants and convertible notes.
This company is going no where except into BK now, unless they find a new CEO, and new money, and dilute the hell out of existing shareholders (again), as they are broke now, broke for the third time, with no more options!
The only thing they have left is a smoke and mirrors line item on the ledger called good will, value on the books (the only remaining stock holders equity) which came from trading $0.7x something shares for another broke company called Terra, a company they bought for about 20 million dollars of COIN stock when COIN shares were 1000% higher than they are now, a company that has had zero new sales, and zero cash flow for nearly 12 months now. The CEO, his brother and Brustor (SP?, the Terra guy) are collecting about 1.5 million dollars a year in salary, and they barely have that much in annual sales this year, and in fact company wide sales this year are less than last years sales, even after buying TERRA!!!!!
They have less than 3 million dollars in annual sales, they have no more cash, and the stock is now so diluted that it is nearly worthless.
They had great plans, great ideas, great funding and back up, but
no idea how to manage cash or execute a business plan (in fact all they did was execute the company, while the CEO lined his pocket), or perhaps the business plan was financially flawed from the start (The NJ deal had a lousy license cost structure....old story, they realized it and dumped that operation at a 40 million dollar loss late last year, but not before buying the Calif operation).
The only profitable operation (Calif) (sales minus cost of goods, before any overhead), does not make enough gross profit to even pay the CEO's salary!!!! Go look at the financials, do some DD, this has been a sinking ship with PR fluff for over 3 years. Even the string of PR fluff is not holding up the stock price.
I don't know how deep you are digging with your DD, but I had a thought recently as to why we may not have heard any additional news on a planned stock swap merger from last year where TTEG was going to take over an auto parts manufacturer in China (a profitable auto parts OEM, that was going to start making small motor cycle sized TTEG engines as part of the merger deal). There has been no further news on it for quite some time, which makes one wonder if the deal is on hold for some reason, dead, or what. I have several China RM stocks (long on) and I have been in the thick of the recent debates about China reverse mergers with US company stocks that have been under short seller, lawfirm ambulance chaser, and nasty Seeking Alpha short article writer attacks. Based on that, I got to wondering this week if the nasty sell off in the China RM stocks stalled the TTEG merger deal. It was separate of the small, non controlling interest stock swap that had been proposed with Falcon Power. I forget the name of the other company.
Where are you getting this garbage data and nonsense from of 50-60 million short shares? The entire OS is only 26,466,000 shares, and only 2 million shares were last reported as short. Source Fidelity brokerage.
This is a real good write up today of what is really going on, and why the shorts were so successful with the timing of their attacks on China based, RM US stocks like TPI, and why they have been so successful with the damage they caused to the entire sector, and why we have an uphill battle ahead. It is because they are between a rock and hard place. The problem is differences in US and China laws. READ all the way to the end, below!:
NEW YORK (Reuters) - Alarmed by widening accounting debacles at U.S.-listed Chinese companies, American regulators are scrambling to stem the damage from gaps in laws adopted to protect investors after the Enron scandal a decade ago.
U.S. investors had risked billions of dollars on hundreds of companies based in China - under a belief they were subject to U.S. rules when they sell and list shares in the United States - but a lot of that money has gone up in smoke.
The accounting blowups have humbled some prominent American investors such as top hedge fund manager John Paulson and former AIG CEO Maurice "Hank" Greenberg, spawned lawsuits and prompted a broad investigation by U.S. regulators.
Since March alone, more than two dozen U.S.-listed Chinese companies have announced auditor resignations or accounting problems, and there have been similar blowups in Canada.
Regulators and exchanges also have appeared flat-footed in the face of the growing scandal.
U.S. laws, including the sweeping 2002 Sarbanes-Oxley reform act meant to root out accounting fraud, lose some of their power with Chinese-based entities. The U.S. has no extradition treaty with China and the evidence gathering process in China is impeded by state secrets laws.
"The Chinese accounting problem has been festering for a long time," said Duke University law professor Jim Cox, who serves on a standing advisory group of the Public Company Accounting Oversight Board (PCAOB), which was set up under Sarbanes-Oxley to oversee accounting firms, including doing thorough inspections of their work.
Thwarted by state laws?
"It's going to get worse before it gets better," said Cox, who faults the U.S. Securities and Exchange Commission for not taking quicker action.
In particular, he said, the SEC has been slow to tighten oversight of U.S. shell companies acquired by Chinese firms through so-called "reverse mergers" to gain access to U.S. capital markets without having to go through an initial public offering.
SEC officials acknowledged problems with inspecting the accounting records of China-based companies well over a year ago at a meeting of the PCAOB advisory group, he said.
Meredith Cross, head of corporation finance for the SEC, said the agency has stepped up its reviews of Chinese reverse merger firms over the past year.
"We're currently thinking through whether there is more that we can do," Cross said.
A year ago, it launched a cross-border working group to review issues with Chinese reverse mergers and other companies with substantial foreign operations.
Officials from the SEC and PCAOB are holding talks with counterparts in Beijing this week in an attempt to get inspection access to Chinese auditors for U.S.-listed companies as one way to get on top of the problem.
But regulators said there is a core problem with tackling the reverse merger question head on because mergers come under state rather than federal law.
"We don't have a way to say, 'You can't do reverse mergers,'" said the SEC's Cross. "Because the issue of whether someone can merge is not an SEC question, but a matter of state law, it's not something where we could just wave a magic wand and say, 'we're not going to let reverse mergers happen anymore.'"
She did, though, note that such firms were bound by reporting requirements once they were listed.
The SEC also has resource constraints, she said, with about 350 people in its corporation finance division reviewing financial reports of more than 10,000 public companies. It has, though, been devoting more resources to the reverse mergers problem, she noted.
Further complicating matters, the SEC's Chinese counterpart, the China Securities Regulatory Commission, has no enforcement authority over many of the companies accused of fraud because they only sell shares in the United States.
Like other securities regulators, the CSRC has limited resources, said former SEC chairman Christopher Cox. "When triage is the name of the game, it's natural that the home country's priority is protecting its own citizens."
The SEC has brought several actions against China-based issuers in recent years. In most cases, action consisted of suspending trading or revoking companies' registration, though more severe penalties were also pursued.
China Energy Savings Technology Inc and its managers were ordered by a federal court in 2009 to pay a $34 million judgment after being charged with a stock manipulation scheme by the SEC.
Chinese courts typically do not enforce U.S. judgments, though at least $4 million will be recovered in that case because the SEC froze assets in the United States.
Access to work papers difficult
Accounting misconduct fell dramatically in the United States after authorities cracked down on corporate crime in the wake of the Enron and WorldCom frauds. A section of Sarbanes-Oxley that made it a felony for executives to certify false financial statements was one big deterrent.
That provision applies to companies that sell securities in U.S. markets, whether they are based in the United States or another country, but few Chinese executives fear being led away in handcuffs because of the lack of an extradition treaty, lawyers said.
"If you're a CEO of a company based in China and sign a false Sarbanes-Oxley certification, it's very difficult for the U.S. government or Justice Department to charge you with that crime, indict you and bring you to justice," said Phillip Kim, attorney at the Rosen Law Firm. "There are no treaties that provide for that."
Some Chinese executives resist answering to U.S. authorities at all, auditors said.
"They believe they should not have to respond if they feel any request is too intrusive and believe that they can tell the SEC no," Mimi Justice, head of Deloitte's forensic and dispute practice in Orange County, California said at a recent conference in Los Angeles.
Getting auditors' work papers -- crucial evidence in many accounting frauds -- has been especially difficult. Many accounting firms would like to hand over records but fear violating China's state secrets law, attorneys said.
"They have a real dilemma on their hands as to how to respond to the U.S. regulators when to do so might expose them to criminal sanctions in China," said Alan Linning, a partner at Sidley Austin in Hong Kong.
Crashing share prices and the publicity surrounding them do, of course, have their own Darwinian way of making investors more vigilant. There is, for example, much less appetite for new Chinese listings now, and many of the earlier listings are little more than penny-stock wreckage.
But to some that just begs the question -- is the action from the regulators too little, too late?
"I think the public is looking for an SEC that is proactive and in front of these issues, and they have yet to do that in this instance," said Lynn Turner, a former chief accountant at the SEC.
(Additional reporting by Sarah N. Lynch, Rachel Armstrong and Clare Baldwin. Editing by Martin Howell)
This is a real good write up today of what is really going on, and why the shorts were so successful with the timing of their attacks on China RM US stocks like JGBO, and so successful with the damage they caused. It is because they are between a rock and hard place. The problem is differences in US and China laws. READ all the way to the end!:
NEW YORK (Reuters) - Alarmed by widening accounting debacles at U.S.-listed Chinese companies, American regulators are scrambling to stem the damage from gaps in laws adopted to protect investors after the Enron scandal a decade ago.
U.S. investors had risked billions of dollars on hundreds of companies based in China - under a belief they were subject to U.S. rules when they sell and list shares in the United States - but a lot of that money has gone up in smoke.
The accounting blowups have humbled some prominent American investors such as top hedge fund manager John Paulson and former AIG CEO Maurice "Hank" Greenberg, spawned lawsuits and prompted a broad investigation by U.S. regulators.
Since March alone, more than two dozen U.S.-listed Chinese companies have announced auditor resignations or accounting problems, and there have been similar blowups in Canada.
Regulators and exchanges also have appeared flat-footed in the face of the growing scandal.
U.S. laws, including the sweeping 2002 Sarbanes-Oxley reform act meant to root out accounting fraud, lose some of their power with Chinese-based entities. The U.S. has no extradition treaty with China and the evidence gathering process in China is impeded by state secrets laws.
"The Chinese accounting problem has been festering for a long time," said Duke University law professor Jim Cox, who serves on a standing advisory group of the Public Company Accounting Oversight Board (PCAOB), which was set up under Sarbanes-Oxley to oversee accounting firms, including doing thorough inspections of their work.
Thwarted by state laws?
"It's going to get worse before it gets better," said Cox, who faults the U.S. Securities and Exchange Commission for not taking quicker action.
In particular, he said, the SEC has been slow to tighten oversight of U.S. shell companies acquired by Chinese firms through so-called "reverse mergers" to gain access to U.S. capital markets without having to go through an initial public offering.
SEC officials acknowledged problems with inspecting the accounting records of China-based companies well over a year ago at a meeting of the PCAOB advisory group, he said.
Meredith Cross, head of corporation finance for the SEC, said the agency has stepped up its reviews of Chinese reverse merger firms over the past year.
"We're currently thinking through whether there is more that we can do," Cross said.
A year ago, it launched a cross-border working group to review issues with Chinese reverse mergers and other companies with substantial foreign operations.
Officials from the SEC and PCAOB are holding talks with counterparts in Beijing this week in an attempt to get inspection access to Chinese auditors for U.S.-listed companies as one way to get on top of the problem.
But regulators said there is a core problem with tackling the reverse merger question head on because mergers come under state rather than federal law.
"We don't have a way to say, 'You can't do reverse mergers,'" said the SEC's Cross. "Because the issue of whether someone can merge is not an SEC question, but a matter of state law, it's not something where we could just wave a magic wand and say, 'we're not going to let reverse mergers happen anymore.'"
She did, though, note that such firms were bound by reporting requirements once they were listed.
The SEC also has resource constraints, she said, with about 350 people in its corporation finance division reviewing financial reports of more than 10,000 public companies. It has, though, been devoting more resources to the reverse mergers problem, she noted.
Further complicating matters, the SEC's Chinese counterpart, the China Securities Regulatory Commission, has no enforcement authority over many of the companies accused of fraud because they only sell shares in the United States.
Like other securities regulators, the CSRC has limited resources, said former SEC chairman Christopher Cox. "When triage is the name of the game, it's natural that the home country's priority is protecting its own citizens."
The SEC has brought several actions against China-based issuers in recent years. In most cases, action consisted of suspending trading or revoking companies' registration, though more severe penalties were also pursued.
China Energy Savings Technology Inc and its managers were ordered by a federal court in 2009 to pay a $34 million judgment after being charged with a stock manipulation scheme by the SEC.
Chinese courts typically do not enforce U.S. judgments, though at least $4 million will be recovered in that case because the SEC froze assets in the United States.
Access to work papers difficult
Accounting misconduct fell dramatically in the United States after authorities cracked down on corporate crime in the wake of the Enron and WorldCom frauds. A section of Sarbanes-Oxley that made it a felony for executives to certify false financial statements was one big deterrent.
That provision applies to companies that sell securities in U.S. markets, whether they are based in the United States or another country, but few Chinese executives fear being led away in handcuffs because of the lack of an extradition treaty, lawyers said.
"If you're a CEO of a company based in China and sign a false Sarbanes-Oxley certification, it's very difficult for the U.S. government or Justice Department to charge you with that crime, indict you and bring you to justice," said Phillip Kim, attorney at the Rosen Law Firm. "There are no treaties that provide for that."
Some Chinese executives resist answering to U.S. authorities at all, auditors said.
"They believe they should not have to respond if they feel any request is too intrusive and believe that they can tell the SEC no," Mimi Justice, head of Deloitte's forensic and dispute practice in Orange County, California said at a recent conference in Los Angeles.
Getting auditors' work papers -- crucial evidence in many accounting frauds -- has been especially difficult. Many accounting firms would like to hand over records but fear violating China's state secrets law, attorneys said.
"They have a real dilemma on their hands as to how to respond to the U.S. regulators when to do so might expose them to criminal sanctions in China," said Alan Linning, a partner at Sidley Austin in Hong Kong.
Crashing share prices and the publicity surrounding them do, of course, have their own Darwinian way of making investors more vigilant. There is, for example, much less appetite for new Chinese listings now, and many of the earlier listings are little more than penny-stock wreckage.
But to some that just begs the question -- is the action from the regulators too little, too late?
"I think the public is looking for an SEC that is proactive and in front of these issues, and they have yet to do that in this instance," said Lynn Turner, a former chief accountant at the SEC.
(Additional reporting by Sarah N. Lynch, Rachel Armstrong and Clare Baldwin. Editing by Martin Howell)
This is a real good write up today of what is really going on, and why the shorts were so successful with the timing of their attacks on China RM US stocks like CNOA, and so successful with the damage they caused. It is because they are between a rock and hard place. The problem is differences in US and China laws. READ all the way to the end!:
NEW YORK (Reuters) - Alarmed by widening accounting debacles at U.S.-listed Chinese companies, American regulators are scrambling to stem the damage from gaps in laws adopted to protect investors after the Enron scandal a decade ago.
U.S. investors had risked billions of dollars on hundreds of companies based in China - under a belief they were subject to U.S. rules when they sell and list shares in the United States - but a lot of that money has gone up in smoke.
The accounting blowups have humbled some prominent American investors such as top hedge fund manager John Paulson and former AIG CEO Maurice "Hank" Greenberg, spawned lawsuits and prompted a broad investigation by U.S. regulators.
Since March alone, more than two dozen U.S.-listed Chinese companies have announced auditor resignations or accounting problems, and there have been similar blowups in Canada.
Regulators and exchanges also have appeared flat-footed in the face of the growing scandal.
U.S. laws, including the sweeping 2002 Sarbanes-Oxley reform act meant to root out accounting fraud, lose some of their power with Chinese-based entities. The U.S. has no extradition treaty with China and the evidence gathering process in China is impeded by state secrets laws.
"The Chinese accounting problem has been festering for a long time," said Duke University law professor Jim Cox, who serves on a standing advisory group of the Public Company Accounting Oversight Board (PCAOB), which was set up under Sarbanes-Oxley to oversee accounting firms, including doing thorough inspections of their work.
Thwarted by state laws?
"It's going to get worse before it gets better," said Cox, who faults the U.S. Securities and Exchange Commission for not taking quicker action.
In particular, he said, the SEC has been slow to tighten oversight of U.S. shell companies acquired by Chinese firms through so-called "reverse mergers" to gain access to U.S. capital markets without having to go through an initial public offering.
SEC officials acknowledged problems with inspecting the accounting records of China-based companies well over a year ago at a meeting of the PCAOB advisory group, he said.
Meredith Cross, head of corporation finance for the SEC, said the agency has stepped up its reviews of Chinese reverse merger firms over the past year.
"We're currently thinking through whether there is more that we can do," Cross said.
A year ago, it launched a cross-border working group to review issues with Chinese reverse mergers and other companies with substantial foreign operations.
Officials from the SEC and PCAOB are holding talks with counterparts in Beijing this week in an attempt to get inspection access to Chinese auditors for U.S.-listed companies as one way to get on top of the problem.
But regulators said there is a core problem with tackling the reverse merger question head on because mergers come under state rather than federal law.
"We don't have a way to say, 'You can't do reverse mergers,'" said the SEC's Cross. "Because the issue of whether someone can merge is not an SEC question, but a matter of state law, it's not something where we could just wave a magic wand and say, 'we're not going to let reverse mergers happen anymore.'"
She did, though, note that such firms were bound by reporting requirements once they were listed.
The SEC also has resource constraints, she said, with about 350 people in its corporation finance division reviewing financial reports of more than 10,000 public companies. It has, though, been devoting more resources to the reverse mergers problem, she noted.
Further complicating matters, the SEC's Chinese counterpart, the China Securities Regulatory Commission, has no enforcement authority over many of the companies accused of fraud because they only sell shares in the United States.
Like other securities regulators, the CSRC has limited resources, said former SEC chairman Christopher Cox. "When triage is the name of the game, it's natural that the home country's priority is protecting its own citizens."
The SEC has brought several actions against China-based issuers in recent years. In most cases, action consisted of suspending trading or revoking companies' registration, though more severe penalties were also pursued.
China Energy Savings Technology Inc and its managers were ordered by a federal court in 2009 to pay a $34 million judgment after being charged with a stock manipulation scheme by the SEC.
Chinese courts typically do not enforce U.S. judgments, though at least $4 million will be recovered in that case because the SEC froze assets in the United States.
Access to work papers difficult
Accounting misconduct fell dramatically in the United States after authorities cracked down on corporate crime in the wake of the Enron and WorldCom frauds. A section of Sarbanes-Oxley that made it a felony for executives to certify false financial statements was one big deterrent.
That provision applies to companies that sell securities in U.S. markets, whether they are based in the United States or another country, but few Chinese executives fear being led away in handcuffs because of the lack of an extradition treaty, lawyers said.
"If you're a CEO of a company based in China and sign a false Sarbanes-Oxley certification, it's very difficult for the U.S. government or Justice Department to charge you with that crime, indict you and bring you to justice," said Phillip Kim, attorney at the Rosen Law Firm. "There are no treaties that provide for that."
Some Chinese executives resist answering to U.S. authorities at all, auditors said.
"They believe they should not have to respond if they feel any request is too intrusive and believe that they can tell the SEC no," Mimi Justice, head of Deloitte's forensic and dispute practice in Orange County, California said at a recent conference in Los Angeles.
Getting auditors' work papers -- crucial evidence in many accounting frauds -- has been especially difficult. Many accounting firms would like to hand over records but fear violating China's state secrets law, attorneys said.
"They have a real dilemma on their hands as to how to respond to the U.S. regulators when to do so might expose them to criminal sanctions in China," said Alan Linning, a partner at Sidley Austin in Hong Kong.
Crashing share prices and the publicity surrounding them do, of course, have their own Darwinian way of making investors more vigilant. There is, for example, much less appetite for new Chinese listings now, and many of the earlier listings are little more than penny-stock wreckage.
But to some that just begs the question -- is the action from the regulators too little, too late?
"I think the public is looking for an SEC that is proactive and in front of these issues, and they have yet to do that in this instance," said Lynn Turner, a former chief accountant at the SEC.
(Additional reporting by Sarah N. Lynch, Rachel Armstrong and Clare Baldwin. Editing by Martin Howell)
This is a real good write up today of what is really going on, and why the shorts were so successful with the timing of their attacks on China RM US stocks like CRTP, and so successful with the damage they caused. It is because they are between a rock and hard place. The problem is differences in US and China laws. READ all the way to the end!:
NEW YORK (Reuters) - Alarmed by widening accounting debacles at U.S.-listed Chinese companies, American regulators are scrambling to stem the damage from gaps in laws adopted to protect investors after the Enron scandal a decade ago.
U.S. investors had risked billions of dollars on hundreds of companies based in China - under a belief they were subject to U.S. rules when they sell and list shares in the United States - but a lot of that money has gone up in smoke.
The accounting blowups have humbled some prominent American investors such as top hedge fund manager John Paulson and former AIG CEO Maurice "Hank" Greenberg, spawned lawsuits and prompted a broad investigation by U.S. regulators.
Since March alone, more than two dozen U.S.-listed Chinese companies have announced auditor resignations or accounting problems, and there have been similar blowups in Canada.
Regulators and exchanges also have appeared flat-footed in the face of the growing scandal.
U.S. laws, including the sweeping 2002 Sarbanes-Oxley reform act meant to root out accounting fraud, lose some of their power with Chinese-based entities. The U.S. has no extradition treaty with China and the evidence gathering process in China is impeded by state secrets laws.
"The Chinese accounting problem has been festering for a long time," said Duke University law professor Jim Cox, who serves on a standing advisory group of the Public Company Accounting Oversight Board (PCAOB), which was set up under Sarbanes-Oxley to oversee accounting firms, including doing thorough inspections of their work.
Thwarted by state laws?
"It's going to get worse before it gets better," said Cox, who faults the U.S. Securities and Exchange Commission for not taking quicker action.
In particular, he said, the SEC has been slow to tighten oversight of U.S. shell companies acquired by Chinese firms through so-called "reverse mergers" to gain access to U.S. capital markets without having to go through an initial public offering.
SEC officials acknowledged problems with inspecting the accounting records of China-based companies well over a year ago at a meeting of the PCAOB advisory group, he said.
Meredith Cross, head of corporation finance for the SEC, said the agency has stepped up its reviews of Chinese reverse merger firms over the past year.
"We're currently thinking through whether there is more that we can do," Cross said.
A year ago, it launched a cross-border working group to review issues with Chinese reverse mergers and other companies with substantial foreign operations.
Officials from the SEC and PCAOB are holding talks with counterparts in Beijing this week in an attempt to get inspection access to Chinese auditors for U.S.-listed companies as one way to get on top of the problem.
But regulators said there is a core problem with tackling the reverse merger question head on because mergers come under state rather than federal law.
"We don't have a way to say, 'You can't do reverse mergers,'" said the SEC's Cross. "Because the issue of whether someone can merge is not an SEC question, but a matter of state law, it's not something where we could just wave a magic wand and say, 'we're not going to let reverse mergers happen anymore.'"
She did, though, note that such firms were bound by reporting requirements once they were listed.
The SEC also has resource constraints, she said, with about 350 people in its corporation finance division reviewing financial reports of more than 10,000 public companies. It has, though, been devoting more resources to the reverse mergers problem, she noted.
Further complicating matters, the SEC's Chinese counterpart, the China Securities Regulatory Commission, has no enforcement authority over many of the companies accused of fraud because they only sell shares in the United States.
Like other securities regulators, the CSRC has limited resources, said former SEC chairman Christopher Cox. "When triage is the name of the game, it's natural that the home country's priority is protecting its own citizens."
The SEC has brought several actions against China-based issuers in recent years. In most cases, action consisted of suspending trading or revoking companies' registration, though more severe penalties were also pursued.
China Energy Savings Technology Inc and its managers were ordered by a federal court in 2009 to pay a $34 million judgment after being charged with a stock manipulation scheme by the SEC.
Chinese courts typically do not enforce U.S. judgments, though at least $4 million will be recovered in that case because the SEC froze assets in the United States.
Access to work papers difficult
Accounting misconduct fell dramatically in the United States after authorities cracked down on corporate crime in the wake of the Enron and WorldCom frauds. A section of Sarbanes-Oxley that made it a felony for executives to certify false financial statements was one big deterrent.
That provision applies to companies that sell securities in U.S. markets, whether they are based in the United States or another country, but few Chinese executives fear being led away in handcuffs because of the lack of an extradition treaty, lawyers said.
"If you're a CEO of a company based in China and sign a false Sarbanes-Oxley certification, it's very difficult for the U.S. government or Justice Department to charge you with that crime, indict you and bring you to justice," said Phillip Kim, attorney at the Rosen Law Firm. "There are no treaties that provide for that."
Some Chinese executives resist answering to U.S. authorities at all, auditors said.
"They believe they should not have to respond if they feel any request is too intrusive and believe that they can tell the SEC no," Mimi Justice, head of Deloitte's forensic and dispute practice in Orange County, California said at a recent conference in Los Angeles.
Getting auditors' work papers -- crucial evidence in many accounting frauds -- has been especially difficult. Many accounting firms would like to hand over records but fear violating China's state secrets law, attorneys said.
"They have a real dilemma on their hands as to how to respond to the U.S. regulators when to do so might expose them to criminal sanctions in China," said Alan Linning, a partner at Sidley Austin in Hong Kong.
Crashing share prices and the publicity surrounding them do, of course, have their own Darwinian way of making investors more vigilant. There is, for example, much less appetite for new Chinese listings now, and many of the earlier listings are little more than penny-stock wreckage.
But to some that just begs the question -- is the action from the regulators too little, too late?
"I think the public is looking for an SEC that is proactive and in front of these issues, and they have yet to do that in this instance," said Lynn Turner, a former chief accountant at the SEC.
(Additional reporting by Sarah N. Lynch, Rachel Armstrong and Clare Baldwin. Editing by Martin Howell)
This is a real good write up today of what is really going on, and why the shorts were so successful with the timing of their attacks on China RM US stocks like CSGH, and so successful with the damage they caused. It is because they are between a rock and hard place. The problem is differences in US and China laws. READ all the way to the end!:
NEW YORK (Reuters) - Alarmed by widening accounting debacles at U.S.-listed Chinese companies, American regulators are scrambling to stem the damage from gaps in laws adopted to protect investors after the Enron scandal a decade ago.
U.S. investors had risked billions of dollars on hundreds of companies based in China - under a belief they were subject to U.S. rules when they sell and list shares in the United States - but a lot of that money has gone up in smoke.
The accounting blowups have humbled some prominent American investors such as top hedge fund manager John Paulson and former AIG CEO Maurice "Hank" Greenberg, spawned lawsuits and prompted a broad investigation by U.S. regulators.
Since March alone, more than two dozen U.S.-listed Chinese companies have announced auditor resignations or accounting problems, and there have been similar blowups in Canada.
Regulators and exchanges also have appeared flat-footed in the face of the growing scandal.
U.S. laws, including the sweeping 2002 Sarbanes-Oxley reform act meant to root out accounting fraud, lose some of their power with Chinese-based entities. The U.S. has no extradition treaty with China and the evidence gathering process in China is impeded by state secrets laws.
"The Chinese accounting problem has been festering for a long time," said Duke University law professor Jim Cox, who serves on a standing advisory group of the Public Company Accounting Oversight Board (PCAOB), which was set up under Sarbanes-Oxley to oversee accounting firms, including doing thorough inspections of their work.
Thwarted by state laws?
"It's going to get worse before it gets better," said Cox, who faults the U.S. Securities and Exchange Commission for not taking quicker action.
In particular, he said, the SEC has been slow to tighten oversight of U.S. shell companies acquired by Chinese firms through so-called "reverse mergers" to gain access to U.S. capital markets without having to go through an initial public offering.
SEC officials acknowledged problems with inspecting the accounting records of China-based companies well over a year ago at a meeting of the PCAOB advisory group, he said.
Meredith Cross, head of corporation finance for the SEC, said the agency has stepped up its reviews of Chinese reverse merger firms over the past year.
"We're currently thinking through whether there is more that we can do," Cross said.
A year ago, it launched a cross-border working group to review issues with Chinese reverse mergers and other companies with substantial foreign operations.
Officials from the SEC and PCAOB are holding talks with counterparts in Beijing this week in an attempt to get inspection access to Chinese auditors for U.S.-listed companies as one way to get on top of the problem.
But regulators said there is a core problem with tackling the reverse merger question head on because mergers come under state rather than federal law.
"We don't have a way to say, 'You can't do reverse mergers,'" said the SEC's Cross. "Because the issue of whether someone can merge is not an SEC question, but a matter of state law, it's not something where we could just wave a magic wand and say, 'we're not going to let reverse mergers happen anymore.'"
She did, though, note that such firms were bound by reporting requirements once they were listed.
The SEC also has resource constraints, she said, with about 350 people in its corporation finance division reviewing financial reports of more than 10,000 public companies. It has, though, been devoting more resources to the reverse mergers problem, she noted.
Further complicating matters, the SEC's Chinese counterpart, the China Securities Regulatory Commission, has no enforcement authority over many of the companies accused of fraud because they only sell shares in the United States.
Like other securities regulators, the CSRC has limited resources, said former SEC chairman Christopher Cox. "When triage is the name of the game, it's natural that the home country's priority is protecting its own citizens."
The SEC has brought several actions against China-based issuers in recent years. In most cases, action consisted of suspending trading or revoking companies' registration, though more severe penalties were also pursued.
China Energy Savings Technology Inc and its managers were ordered by a federal court in 2009 to pay a $34 million judgment after being charged with a stock manipulation scheme by the SEC.
Chinese courts typically do not enforce U.S. judgments, though at least $4 million will be recovered in that case because the SEC froze assets in the United States.
Access to work papers difficult
Accounting misconduct fell dramatically in the United States after authorities cracked down on corporate crime in the wake of the Enron and WorldCom frauds. A section of Sarbanes-Oxley that made it a felony for executives to certify false financial statements was one big deterrent.
That provision applies to companies that sell securities in U.S. markets, whether they are based in the United States or another country, but few Chinese executives fear being led away in handcuffs because of the lack of an extradition treaty, lawyers said.
"If you're a CEO of a company based in China and sign a false Sarbanes-Oxley certification, it's very difficult for the U.S. government or Justice Department to charge you with that crime, indict you and bring you to justice," said Phillip Kim, attorney at the Rosen Law Firm. "There are no treaties that provide for that."
Some Chinese executives resist answering to U.S. authorities at all, auditors said.
"They believe they should not have to respond if they feel any request is too intrusive and believe that they can tell the SEC no," Mimi Justice, head of Deloitte's forensic and dispute practice in Orange County, California said at a recent conference in Los Angeles.
Getting auditors' work papers -- crucial evidence in many accounting frauds -- has been especially difficult. Many accounting firms would like to hand over records but fear violating China's state secrets law, attorneys said.
"They have a real dilemma on their hands as to how to respond to the U.S. regulators when to do so might expose them to criminal sanctions in China," said Alan Linning, a partner at Sidley Austin in Hong Kong.
Crashing share prices and the publicity surrounding them do, of course, have their own Darwinian way of making investors more vigilant. There is, for example, much less appetite for new Chinese listings now, and many of the earlier listings are little more than penny-stock wreckage.
But to some that just begs the question -- is the action from the regulators too little, too late?
"I think the public is looking for an SEC that is proactive and in front of these issues, and they have yet to do that in this instance," said Lynn Turner, a former chief accountant at the SEC.
(Additional reporting by Sarah N. Lynch, Rachel Armstrong and Clare Baldwin. Editing by Martin Howell)
This is a real good write up today of what is really going on, and why the shorts were so successful with the timing of their attacks on China RM US stocks like CBEH, and so successful with the damage they caused. It is because they are between a rock and hard place. The problem is differences in US and China laws. READ all the way to the end!:
NEW YORK (Reuters) - Alarmed by widening accounting debacles at U.S.-listed Chinese companies, American regulators are scrambling to stem the damage from gaps in laws adopted to protect investors after the Enron scandal a decade ago.
U.S. investors had risked billions of dollars on hundreds of companies based in China - under a belief they were subject to U.S. rules when they sell and list shares in the United States - but a lot of that money has gone up in smoke.
The accounting blowups have humbled some prominent American investors such as top hedge fund manager John Paulson and former AIG CEO Maurice "Hank" Greenberg, spawned lawsuits and prompted a broad investigation by U.S. regulators.
Since March alone, more than two dozen U.S.-listed Chinese companies have announced auditor resignations or accounting problems, and there have been similar blowups in Canada.
Regulators and exchanges also have appeared flat-footed in the face of the growing scandal.
U.S. laws, including the sweeping 2002 Sarbanes-Oxley reform act meant to root out accounting fraud, lose some of their power with Chinese-based entities. The U.S. has no extradition treaty with China and the evidence gathering process in China is impeded by state secrets laws.
"The Chinese accounting problem has been festering for a long time," said Duke University law professor Jim Cox, who serves on a standing advisory group of the Public Company Accounting Oversight Board (PCAOB), which was set up under Sarbanes-Oxley to oversee accounting firms, including doing thorough inspections of their work.
Thwarted by state laws?
"It's going to get worse before it gets better," said Cox, who faults the U.S. Securities and Exchange Commission for not taking quicker action.
In particular, he said, the SEC has been slow to tighten oversight of U.S. shell companies acquired by Chinese firms through so-called "reverse mergers" to gain access to U.S. capital markets without having to go through an initial public offering.
SEC officials acknowledged problems with inspecting the accounting records of China-based companies well over a year ago at a meeting of the PCAOB advisory group, he said.
Meredith Cross, head of corporation finance for the SEC, said the agency has stepped up its reviews of Chinese reverse merger firms over the past year.
"We're currently thinking through whether there is more that we can do," Cross said.
A year ago, it launched a cross-border working group to review issues with Chinese reverse mergers and other companies with substantial foreign operations.
Officials from the SEC and PCAOB are holding talks with counterparts in Beijing this week in an attempt to get inspection access to Chinese auditors for U.S.-listed companies as one way to get on top of the problem.
But regulators said there is a core problem with tackling the reverse merger question head on because mergers come under state rather than federal law.
"We don't have a way to say, 'You can't do reverse mergers,'" said the SEC's Cross. "Because the issue of whether someone can merge is not an SEC question, but a matter of state law, it's not something where we could just wave a magic wand and say, 'we're not going to let reverse mergers happen anymore.'"
She did, though, note that such firms were bound by reporting requirements once they were listed.
The SEC also has resource constraints, she said, with about 350 people in its corporation finance division reviewing financial reports of more than 10,000 public companies. It has, though, been devoting more resources to the reverse mergers problem, she noted.
Further complicating matters, the SEC's Chinese counterpart, the China Securities Regulatory Commission, has no enforcement authority over many of the companies accused of fraud because they only sell shares in the United States.
Like other securities regulators, the CSRC has limited resources, said former SEC chairman Christopher Cox. "When triage is the name of the game, it's natural that the home country's priority is protecting its own citizens."
The SEC has brought several actions against China-based issuers in recent years. In most cases, action consisted of suspending trading or revoking companies' registration, though more severe penalties were also pursued.
China Energy Savings Technology Inc and its managers were ordered by a federal court in 2009 to pay a $34 million judgment after being charged with a stock manipulation scheme by the SEC.
Chinese courts typically do not enforce U.S. judgments, though at least $4 million will be recovered in that case because the SEC froze assets in the United States.
Access to work papers difficult
Accounting misconduct fell dramatically in the United States after authorities cracked down on corporate crime in the wake of the Enron and WorldCom frauds. A section of Sarbanes-Oxley that made it a felony for executives to certify false financial statements was one big deterrent.
That provision applies to companies that sell securities in U.S. markets, whether they are based in the United States or another country, but few Chinese executives fear being led away in handcuffs because of the lack of an extradition treaty, lawyers said.
"If you're a CEO of a company based in China and sign a false Sarbanes-Oxley certification, it's very difficult for the U.S. government or Justice Department to charge you with that crime, indict you and bring you to justice," said Phillip Kim, attorney at the Rosen Law Firm. "There are no treaties that provide for that."
Some Chinese executives resist answering to U.S. authorities at all, auditors said.
"They believe they should not have to respond if they feel any request is too intrusive and believe that they can tell the SEC no," Mimi Justice, head of Deloitte's forensic and dispute practice in Orange County, California said at a recent conference in Los Angeles.
Getting auditors' work papers -- crucial evidence in many accounting frauds -- has been especially difficult. Many accounting firms would like to hand over records but fear violating China's state secrets law, attorneys said.
"They have a real dilemma on their hands as to how to respond to the U.S. regulators when to do so might expose them to criminal sanctions in China," said Alan Linning, a partner at Sidley Austin in Hong Kong.
Crashing share prices and the publicity surrounding them do, of course, have their own Darwinian way of making investors more vigilant. There is, for example, much less appetite for new Chinese listings now, and many of the earlier listings are little more than penny-stock wreckage.
But to some that just begs the question -- is the action from the regulators too little, too late?
"I think the public is looking for an SEC that is proactive and in front of these issues, and they have yet to do that in this instance," said Lynn Turner, a former chief accountant at the SEC.
(Additional reporting by Sarah N. Lynch, Rachel Armstrong and Clare Baldwin. Editing by Martin Howell)
It was reported as a quote in a reported interview with the CEO of All Power, reported by one of the short article writers in Seeking Alpha (Varian View, IIRC) (so it was not unbiased journalism!!!), who has been quiet since they posted the two attack articles on ABAT. A third and fourth article, second writer popped up, but he screwed up the math on his ABAT attack so bad that no one listened to him after that.
This is a real good write up today of what is really going on, and why the shorts were so successful with the timing of their attacks on China RM US stocks, and so successful with the damage they caused. It is because they are between a rock and hard place. The problem is differences in US and China laws. READ all the way to the end!:
NEW YORK (Reuters) - Alarmed by widening accounting debacles at U.S.-listed Chinese companies, American regulators are scrambling to stem the damage from gaps in laws adopted to protect investors after the Enron scandal a decade ago.
U.S. investors had risked billions of dollars on hundreds of companies based in China - under a belief they were subject to U.S. rules when they sell and list shares in the United States - but a lot of that money has gone up in smoke.
The accounting blowups have humbled some prominent American investors such as top hedge fund manager John Paulson and former AIG CEO Maurice "Hank" Greenberg, spawned lawsuits and prompted a broad investigation by U.S. regulators.
Since March alone, more than two dozen U.S.-listed Chinese companies have announced auditor resignations or accounting problems, and there have been similar blowups in Canada.
Regulators and exchanges also have appeared flat-footed in the face of the growing scandal.
U.S. laws, including the sweeping 2002 Sarbanes-Oxley reform act meant to root out accounting fraud, lose some of their power with Chinese-based entities. The U.S. has no extradition treaty with China and the evidence gathering process in China is impeded by state secrets laws.
"The Chinese accounting problem has been festering for a long time," said Duke University law professor Jim Cox, who serves on a standing advisory group of the Public Company Accounting Oversight Board (PCAOB), which was set up under Sarbanes-Oxley to oversee accounting firms, including doing thorough inspections of their work.
Thwarted by state laws?
"It's going to get worse before it gets better," said Cox, who faults the U.S. Securities and Exchange Commission for not taking quicker action.
In particular, he said, the SEC has been slow to tighten oversight of U.S. shell companies acquired by Chinese firms through so-called "reverse mergers" to gain access to U.S. capital markets without having to go through an initial public offering.
SEC officials acknowledged problems with inspecting the accounting records of China-based companies well over a year ago at a meeting of the PCAOB advisory group, he said.
Meredith Cross, head of corporation finance for the SEC, said the agency has stepped up its reviews of Chinese reverse merger firms over the past year.
"We're currently thinking through whether there is more that we can do," Cross said.
A year ago, it launched a cross-border working group to review issues with Chinese reverse mergers and other companies with substantial foreign operations.
Officials from the SEC and PCAOB are holding talks with counterparts in Beijing this week in an attempt to get inspection access to Chinese auditors for U.S.-listed companies as one way to get on top of the problem.
But regulators said there is a core problem with tackling the reverse merger question head on because mergers come under state rather than federal law.
"We don't have a way to say, 'You can't do reverse mergers,'" said the SEC's Cross. "Because the issue of whether someone can merge is not an SEC question, but a matter of state law, it's not something where we could just wave a magic wand and say, 'we're not going to let reverse mergers happen anymore.'"
She did, though, note that such firms were bound by reporting requirements once they were listed.
The SEC also has resource constraints, she said, with about 350 people in its corporation finance division reviewing financial reports of more than 10,000 public companies. It has, though, been devoting more resources to the reverse mergers problem, she noted.
Further complicating matters, the SEC's Chinese counterpart, the China Securities Regulatory Commission, has no enforcement authority over many of the companies accused of fraud because they only sell shares in the United States.
Like other securities regulators, the CSRC has limited resources, said former SEC chairman Christopher Cox. "When triage is the name of the game, it's natural that the home country's priority is protecting its own citizens."
The SEC has brought several actions against China-based issuers in recent years. In most cases, action consisted of suspending trading or revoking companies' registration, though more severe penalties were also pursued.
China Energy Savings Technology Inc and its managers were ordered by a federal court in 2009 to pay a $34 million judgment after being charged with a stock manipulation scheme by the SEC.
Chinese courts typically do not enforce U.S. judgments, though at least $4 million will be recovered in that case because the SEC froze assets in the United States.
Access to work papers difficult
Accounting misconduct fell dramatically in the United States after authorities cracked down on corporate crime in the wake of the Enron and WorldCom frauds. A section of Sarbanes-Oxley that made it a felony for executives to certify false financial statements was one big deterrent.
That provision applies to companies that sell securities in U.S. markets, whether they are based in the United States or another country, but few Chinese executives fear being led away in handcuffs because of the lack of an extradition treaty, lawyers said.
"If you're a CEO of a company based in China and sign a false Sarbanes-Oxley certification, it's very difficult for the U.S. government or Justice Department to charge you with that crime, indict you and bring you to justice," said Phillip Kim, attorney at the Rosen Law Firm. "There are no treaties that provide for that."
Some Chinese executives resist answering to U.S. authorities at all, auditors said.
"They believe they should not have to respond if they feel any request is too intrusive and believe that they can tell the SEC no," Mimi Justice, head of Deloitte's forensic and dispute practice in Orange County, California said at a recent conference in Los Angeles.
Getting auditors' work papers -- crucial evidence in many accounting frauds -- has been especially difficult. Many accounting firms would like to hand over records but fear violating China's state secrets law, attorneys said.
"They have a real dilemma on their hands as to how to respond to the U.S. regulators when to do so might expose them to criminal sanctions in China," said Alan Linning, a partner at Sidley Austin in Hong Kong.
Crashing share prices and the publicity surrounding them do, of course, have their own Darwinian way of making investors more vigilant. There is, for example, much less appetite for new Chinese listings now, and many of the earlier listings are little more than penny-stock wreckage.
But to some that just begs the question -- is the action from the regulators too little, too late?
"I think the public is looking for an SEC that is proactive and in front of these issues, and they have yet to do that in this instance," said Lynn Turner, a former chief accountant at the SEC.
(Additional reporting by Sarah N. Lynch, Rachel Armstrong and Clare Baldwin. Editing by Martin Howell)